D.C. Market Weak for Homebuilders

The Washington D.C. housing market continues to see far fewer home orders because of the rising inventory levels in the region, which is hurting homebuilders.

Contracts in the greater metro region fell 40% in May, and closings declined 32%, according to a research note from Raymond James analyst Rick Murray that was released Thursday morning.

Inventory for sale at the end of the month totaled almost 25,000 units, which represents 5.9 months of supply, compared with 1.1 months a year ago and 5.3 months in April.

"Conditions appear to be deteriorating in the D.C. market and we suspect stabilization will not come for some time as immense speculation over the past few years will weigh on the market for some time," Murray wrote.

Public builders with a major presence in the market include Toll Brothers ( TOL), Hovnanian ( HOV), NVR ( NVR), and Comstock Homebuilding ( CHCI).

Besides the nation's capital, parts of California, southern Florida and Phoenix have also seen rising housing inventories, which have hurt new home sales at builders in the second quarter.